NRF Praises “Swipe Fee” Legislation

NRF Praises “Swipe Fee” Legislation

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The National Retail Federation welcomed a provision in financial services reform legislation passed by the House last week that will help hold down the $20 billion in debit card swipe fees charged annually by the banking industry and allow merchants to give discounts to customers who don't use credit cards.

“The House has sent a clear message that big banks shouldn't be allowed to drive up consumer prices by charging fees that are outrageously out of proportion to the actual cost of processing a transaction,” NRF Senior Vice President and General Counsel Mallory Duncan said in a release. “The requirements of this bill should result in debit card swipe fees that are truly 'reasonable' and ensure that banks can't put their hands quite as far into consumers' wallets as they do today.”

The House voted 237-192 last Wednesday to approve the conference report on H.R. 4173, the Dodd-Frank Wall Street Reform Act of 2010, named for Senate Banking Committee Chairman Christopher Dodd, D-Conn., and House Financial Services Committee Chairman Barney Frank, D-Mass. The report is the final version of a pair of wide-ranging financial services reform bills first passed by the House in November and the Senate in September. The Senate is expected to vote on measure later this week in order to have it on President Obama’s desk before Congress heads home for the Independence Day holiday.

The bill includes an amendment sponsored by Senate Majority Whip Richard Durbin, D-Ill., that would require the Federal Reserve to set regulations resulting in “reasonable and proportional” swipe fees for debit cards. The Fed would be required to take into account banks' actual costs for processing the transactions and the fact that paper checks drawn on the same accounts are paid at face value. The amendment would also bar the card industry from interfering with merchants who offer a discount or other benefit to customers who pay by cash, check or debit card rather than credit cards, and would allow merchants to set minimum purchase amounts of up to $10 for credit cards.

Swipe fees–officially known as interchange fees–are a percentage of the transaction charged by card company banks each time a card is swiped to pay for a purchase. The fees average between 1 percent and 2 percent for debit cards and 2 percent or more for credit cards. Overall swipe fees charged to retailers and other business by Visa and MasterCard banks totaled $48 billion in 2008, with debit swipe fees accounting for $20 billion of the total.

Current card and banking industry prices effectively require retailers to include the fees in the price of merchandise, resulting in the average household paying $427 more annually than they would pay without the fees, according to NRF estimates.

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